Analysis of Patent Acquisition Competition between Small Company and Big Company: A Game Theoretical Real Options Approach

Abstract

When a company invests in a R&D project and tries to acquire patents under uncertainty, it is important for the company to have many real options to respond flexibly.However, when the other company entered into the same R&D project early with preemption, the company might not earn enough profit. Under such competition, it is critical to determine the timing in starting the investment. This paper analyzes the optimal investment strategy for two asymmetric firms in getting a patent in the presence of uncertainty and competition.Based on trade-off between a small and a big companies' success rates of getting a patent and initial investment costs, we consider a competitive situation where two asymmetric firms might face. The numerical result shows that a small company can be competitive with a big company by reducing its initial investment cost and that this model can describe a small company's market positionings in the real world.

Evaluation of Patent Race between Three Firms Using a Game‐Theoretic Real Options Approach

“…In particular, patent races and technical cooperation were evaluated and analyzed by Weeds [7] in the case of two firms of the same size, and by Aoki and Imai [8] in the case of firms of different size (small and large). In particular, patent races and technical cooperation were evaluated and analyzed by Weeds [7] in the case of two firms of the same size, and by Aoki and Imai [8] in the case of firms of different size (small and large).…”

“…Recently, much attention has been attracted by a game-theoretical real options approach in which profit is maximized by deferring R&D when the patent acquisition period and future profit vary uncertainly, as in patent races among several firms. In particular, patent races and technical cooperation were evaluated and analyzed by Weeds [7] in the case of two firms of the same size, and by Aoki and Imai [8] in the case of firms of different size (small and large).…”